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Helios and Matheson Analytics: The Long and Short Of It

Helios and Matheson Analytics (HMNY) has been the center of attention for many recently. After purchasing a majority stake in the unlimited movie theater subscription service less than a year ago, the company promptly dropped the price of the service and expanded the audience. During this time, the company touted its ability to revive the movie and entertainment industry, and has seen the benefits of its perceived success in its stock price. While we have seen dramatic peaks and valleys in the price of the stock, bringing it as high as $32.90 per share on October 11, 2017 and as low as $2.66 on April 2, 2018, the stock is currently trading about a dollar per share higher than it was on the day that the majority stake in MoviePass was acquired.

Overall, many would look at that as a positive, and for all intensive purposes, it is. However, when we dig deeper into the story, some obvious red flags appear. While Helios and Matheson continues to unleash a wave of positive press releases, investors seem to be forgetting about the risks.

There’s No Denying That Helios And Matheson Analytics LOOKS Good

At the moment, you’d be hard pressed to deny the fact that Helios and Matheson Analytics looks like a good investment. The company has seen dramatic growth in its user base. At last count, the company had more than 2 million paying subscribers. Not to mention, the company has made various statements recently making it clear that their plans are to ensure that the MoviePass user count grows from more than 2 million paying subscribers to more than 5 million paying subscribers; and it’s using a recently announced promotion with iHeart Radio to help ensure that this happens.

At the same time, Helios and Matheson Analytics has been buying more and more of MoviePass and just announced another acquisition. In fact, today, the company owns 81% of MoviePass and recently announced that it acquired Moviefone, a MoviePass competitor that mixes unlimited movie theater tickets with unlimited streaming services.

Things Aren’t Always As They Appear

Just taking a look at the recent news released by Helios and Matheson Analytics, things look pretty good. However, when you dive deeper into the stock, red flags quickly start to emerge. At the end of the day, the overwhelming success in subscriber growth seems to be shielding the company from the effects that we would generally see in the value of a stock with massively growing losses.

These losses ultimately are the result of the growth in MoviePass that has led to all of the excitement. However, the problem is a very simple one to pinpoint. At the moment, the price of MoviePass’ monthly membership is $6.95 per month. Of course, that’s a great deal for consumers who would otherwise have to pay an average of $8.73 every time they wanted to go to the movie theater. The big problem for Helios and Matheson Analytics is the fact that for the most part, they pay the full price of a movie ticket every time one of their subscribers goes to the theater, well, at least MoviePass does.

However, MoviePass simply isn’t making money and can’t afford to pay this cost. That’s why we’ve consistently seen press releases surrounding the fact that Helios and Matheson Analytics is buying more and more of MoviePass, with their original stake in the company starting at 53%, a stake that has grown to 81% in less than a year. While it would be easy to argue that Helios and Matheson sees opportunity here, and I’m sure they do, that’s not why they’re increasing their stake. The company is increasing its stake in MoviePass by providing the funding needed to keep the product alive, even though it’s generating huge losses.

The Bullish Argument

The bullish argument here is an understandable one. Ultimately, the bulls believe that while MoviePass is generating losses at the moment, the fact that Helios and Matheson is a data company is key. With the impressive growth that we’ve seen in MoviePass, the bulls argue that the company is mining massive amounts of data. This data, according to both the company and those that believe in it, will be a gold mine.

Helios and Matheson Analytics is currently in the process of putting together data sales, marketing services, and more resources for the entertainment industry. In fact, it has already made some announcements of agreements to promote independent films and other services. While this side of the business is likely a long way from generating profit, the bulls argue that holding onto Helios and Matheson early on will lead to big gains in the long run due to growth in data and marketing sales.

Time Is Of The Essence

While there’s no arguing the fact that the team at Helios and Matheson is an impressive one, and the fact that they are mining enough data to create a cornerstone outlet of data and marketing for the entertainment industry, the truth is that time is of the essence.

At the moment, investors seem to be putting their faith into the company, and understandably so. However, at the current rate of growth in losses due to growth in subscriptions, faith won’t last forever. Helios and Matheson is going to need to put its marketing plans into place quickly. Until they are able to make the MoviePass service profitable, the potential for yet another dilutive offering grows. This phenomena was best explained in a recent statement from Stavros Lambouris, CEO of HYCM Europe, a leading global exchange. Here’s what he had to offer:

“No matter what market you are looking at, a key driver of that market will be the perspective of investors and traders. In the case of Helios and Matheson, the perspective amongst investors seems positive at the moment. However, that could change with every public offering of shares on the road to profit.”

The Long And Short Of It

With Helios and Matheson getting so much press lately, it’s easy to see why so many are excited about the stock. However, the reality is that the company has some real hurdles that it’s going to need to make its way over in order to make its way to profit. The key here is going to be whether or not the company can start generating profit quickly enough to keep investors happy once all of the hype dies down.

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